Kraft Heinz sees potential for growth in emerging markets and foodservice
2023-06-20
On June 15, 2023, the Kraft Heinz Company held its earning call meeting at the Evercore ISI 3rd Annual Consumer and Retail Conference. The call featured the EVP & Global CFO and VP, Head of Global Investor Relations of the company, Andre Maciel and Anne-Marie Megela, respectively, along with David Palmer from Evercore ISI.
During the call, the management expressed their belief that the market is currently undervaluing the company's potential for growth in emerging markets and foodservice, which represents two-thirds of the company's growth in the future. The company has been executing its strategy and relying heavily on its three pillars of growth, including foodservice, emerging markets, and the GROW platforms in the U.S. The management feels confident about the company's trajectory and sees a lot of opportunities ahead. They have been making important changes since the second half of last year, such as investing back in the business in marketing, R&D, and technology, and deploying capital in a more intentional way. Overall, the management believes it is an exciting time to be with Kraft Heinz.
The company has been making changes in its operating model, breaking down silos, having a better balance of collaborative metrics, strong integration between commercial and supply chain, change of mindset, becoming more consumer-centric, better leveraging the portfolio, and having a long-term orientation. They plan to leverage their core brands in incremental spaces, have cross-functional teams dedicated to innovation, and test products in the market before national launches to decrease risk. They aim to bring innovation faster and ramp up their portfolio from the second half of this year, building upon the number of new products in 2024 and 2025.
The company's outlook for the quarter/year is cautious, with a focus on improving efficiency and stabilizing volume. They expect volume to still be negative as they exit the year and anticipate volume to stabilize and flip to positive at some point in 2024, but not by the end of the year. They still expect the year volume to decline in the low single digit, mid-single-digit territory. The company is also striving to improve efficiency in their supply chain, with a goal of $2.5 billion in efficiency from now through 2027.
The company has made progress on strategic initiatives by creating a three-year and five-year strategic plan, investing in growth through marketing, R&D, and technology, becoming more open to external partnerships, expanding the contribution from gross efficiencies, and increasing innovation contribution as a percentage of revenue through incremental investments behind R&D and changing the ways of working on how they launch products.
Although the transcript does not provide specific information about the company's capital spending plans, it does mention that the company is accelerating its investments in marketing, R&D, and technology, and expanding the contribution from gross efficiencies in its plan. The company is also investing in innovation by adding extra headcount on the R&D space and changing the ways of working on how they launch products.
The company's key drivers of the business include changes made in the operating model, breaking down silos, having a better balance of collaborative metrics, strong integration between commercial and supply chain, change of mindset, becoming more consumer-centric, better leveraging the portfolio, and having a long-term orientation. The company is actively working to stay competitive and adapt to changes in the industry by investing in marketing, R&D, and technology to accelerate growth and focusing on innovation as a key component of their growth moving forward.
In conclusion, the Kraft Heinz Company is confident in its potential for growth in emerging markets and foodservice, and has been executing its strategy by investing in marketing, R&D, and technology, and deploying capital in a more intentional way. The company is actively working to stay competitive and adapt to changes in the industry by focusing on innovation and improving efficiency in their supply chain. The company's outlook for the quarter/year is cautious, with a focus on improving efficiency and stabilizing volume. Overall, the company believes it is an exciting time to be with Kraft Heinz.